Mauritius Telecom has emerged as the preferred company to buy a
majority stake in troubled Uganda Telecom Ltd, according to a leaked
Cabinet memo.
The seven-page memo dated last month,
says that out of the six firms that put in bids to buy majority stake in
UTL, the Mauritian telco was cleared by the Financial Intelligence
Authority (FIA) “as the only credible and financially stable company
among the evaluated companies.”
The Minister of Finance
tabled the memo to his colleagues, showing that Mauritius Telecom
offered $45 million “as consideration for assets,” capital investment of
$100 million over a period of three years and a 69-31 per cent
shareholding structure between itself and the government.
“According to the FIA report, the best option available is Mauritius Telecom, which has offered $45 million,” the memo reads.
The tone of the memo gives the sense that only formalities remain for the Mauritian telco to take over UTL.
“Colleagues,
in light of where we are, and with a view to quickly conclude this
matter, we propose as follows: The administrator awards and finalises
with Mauritius Telecom as the only credible potential partner with the
government as recommended by the Financial Intelligence Authority,” the
minister writes, stating this position as the first option in the sale
of the majority stake.
Offer below market value
However, according to the memo, a copy of which The EastAfrican
has obtained, the UTL administrator Bemanya Twebaze was concerned that
Mauritius Telecom’s offer is below the assessed market value of UTL,
which is currently set at $80 million.
The offer is way
below the $70 million made for consideration of assets, $285 million
capital investment over a three-year period and a shareholding split of
62-38 per cent, tabled by Hamilton Telecom.
“Seeing as
the administrator’s duty is to get the best return for the creditors, he
proposes to select the best three potential partners and engage them
further with a view to revising their offer upwards. A final offer will
be made to a partner with the highest offer,” the memo says.
This
position is premised on the Insolvency Act, which gives power to the
administrator to get the highest amount of money for the creditors as
part of his duty in returning the company to better financial health.
Safaricom’s withdrawal
However,
it is understood that in an April 30 Cabinet meeting, President Yoweri
Museveni was rooting for Safaricom, which had shown interest in
partnering with another bidder, Afrinet Communications Ltd, to buy the
Ugandan telco.
But, based on the latest Cabinet update
on the process of sourcing a strategic partner to invest in UTL, the
Kenyan telecom seems to have “since withdrawn its interest.”
As
a result of Safaricom’s withdrawal, Afrinet Communications Ltd, which
had offered the second best purchase price of $67 million, also
confirmed to Finance Minister Matia Kasaija that they had withdrawn
their participation.
Other firms looking to take over
UTL include Teleology Holdings, which offers a purchase price of $60.5
million, capital investment of $230 million over three years, and a
67-33 per cent shareholding structure; Neubacher Montage LLP offers $60
million for assets, $211 million capital investment and a 68-32 per cent
ownership structure.
Baylis Consortium is listed
second from bottom, with an offer of $55 million for assets, capital
investment of $120 million over five years and a proposed 70-30 per cent
shareholding structure.
UTL went into administration
in April 2017, after years of zero underinvestment, corruption and
mismanagement — when its main shareholder Libya’s private sector
investment arm under its LapGreen telecom brand failed to inject
required capital in the telco following former Libyan leader Muammar
Gaddafi’s death in 2012.
The government, which holds a
31 per cent stake in the company, has since worked to turn around the
telco whose total liability stands at $147 million owed to several
creditors.
The creditors include the government of
Uganda which is owed $53.62 million; National Social Security Fund is
owed $2.84 million; East and Southern Africa Trade and Development/PTA
Bank is owed $8.91 million; Uganda Communications Employees Contributory
Pension Scheme is owed $3.34 million and others $77.86 million.
The
government is keen on getting several key concessions as demanded by
the proposed strategic investor in order to revamp UTL. Some of these
include an extension of the telco’s service licence for 20 years and
expansion of frequency bandwidth.
Other concessions the
government wants for the investor are tax waivers on import duty for
equipment, corporate tax, VAT and excise duty on services for the
initial four to seven years, UTL to become the sole provider of ICT
services to the government and for the telco to access and use the
National Backbone Infrastructure.
The current ownership
of the financially stressed, technically insolvent and under
administration UTL is UCom with a 69 per cent stake and the Uganda
government with a 31 per cent shareholding.
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